Essay on Demonetization – For Students and Children In English

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Demonetization refers to the withdrawal of currency, coin or other valuables from being used as legal tender. In the process of demonetization, a particular unit/s of currency is/are completely banned for use by the members of the general public or government. The old currency thus demonetized, instantly turns into scrap, and is meant either to be replaced by new currency issued against it or to be deposited in banks.

Long and Short Essay on Demonetization

Essay on Demonetization and its Consequences (300 words)


When a government scraps the legal tender of a certain denomination, it is termed as demonetization. Usually, the tender thus scraped is replaced by new currency by the government. The government of India had previously announced demonetization on three occasions – first in 1946, second in 1978 and third in 2016, with the aim of countering black money, tax evasion, and fake currency.

Consequences of Demonetization

There are three main consequences of demonetization – it counters tax evasion, it counters black money and lastly, it voids or nulls the value of the fake or counterfeit currency. The move was directed towards the income which was not reported and thus escaped taxation. The unreported and untaxed money largely constituted the money obtained from illegal activities like – human trafficking, smuggling, etc. Such money was also used to fund anti-national activities, such as Naxalism and terrorism.

India’s neighbor Pakistan, the main source of terrorism in India, had strategically printed fake Indian currency in order to destabilize the Indian economy as well as to fund terrorism and other anti-national activities on Indian soil. Thus, the decision of demonetization played a significant role in stopping the funds for the promotion of illegal and anti-national activities, along with countering internal tax evasions and unaccounted stashing of currency notes.

With sudden scrapping of tenders, those who have stashed large amounts of currency had no option but to declare it and pay the taxes.


The decision of demonetization might have been hard for the general populace of the nation, nevertheless, it was also necessary. It’s better to be in long queues in front of banks for a brief period of time, rather than to leave the nation at mercy of foreign conspirators. Though, some factions may criticize the move as a bad decision and a jolt on the economy; nevertheless, it was necessary considering Naxal funding, terror funding and unaccounted money that was circulating in Indian markets.


Essay on Meaning, Date, Effects, and Advantages of Demonetization (400 words)


When a nation’s government legally bans the coins, notes of a certain denomination, the movie is termed as demonetization. The currency thus banned, might or might not be replaced by the new currency. Demonetization is aimed at countering multiple problems like illegal activities and their funding source, Naxalism, terrorism, illegal stashing of currency, tax evasion, and counterfeit currency.

Date of Demonetization in India

Prime Minister of India announced the demonetization of legal tenders of Rs. 500 and Rs. 1000, effective from 20:15 on 8th November 2016. Though, it wasn’t the first time, as India had witnessed demonetization twice before.

The first demonetization was effected by the colonial regime on 12th January 1946, while India was being governed under the Government of India Act 1935. A decision to ban 10 Pound notes was made by the government, to check tax evasion and other illegal activities.

The second decision of demonetization was made post-independence on 16th January 1978. This time the decision was made to demonetize currency notes of Rs. 1000, Rs. 5000 and Rs. 10000. But the past two occasions are different from the 2016 demonetization, in the way that the banned currency was not replaced by a new one on the previous two occasions.

Effects and Advantages of Demonetization in India

Demonetization has far-reaching effects on a nation’s economy. For centuries governments have been using it as a tool to curb corruption and other illegal activities. Demonetization boosts a nation’s economy by phasing out fake currencies and bringing untaxed money into the account.

Demonetization is a measure taken with multiple objectives in mind. It would be a fallacy to take it as having a single objective. In general, it serves as a countermeasure for various illegal as well as anti-national activities. The prime objectives in the Indian context were to curb the counterfeit currency that was circulating in the Indian market. Apart from curbing fake currency, the movie was also targeted to bring untaxed wealth back into the mainstream.

India had been dealing with Naxalism for decades. Indian Naxals receive funds from various sources placed in and outside India. The money used for funding anti-national movement remains outside the reaches of tax agencies and of course, are in large denominations i.e. Rs. 500 and Rs. 1000. Instant demonetization of these denominations of currencies resulted in the currency becoming useless, thus stopping the funding of anti-national and illegal activities.


Demonetization isn’t new to the world. Governments across the world have been taking the decisions of demonetization since the past century, from time to time. Though the currency which was demonetized may differ, the objectives largely have remained the same i.e. to counter inflation, black money, stop illegal activities, pull back counterfeit currency out of the economy, bring unaccounted money under the scanner of tax agencies and to erase accumulation of large untaxed cash by individuals.


Essay on the Impact of Demonetization on Indian Economy (500 words)


Demonetization refers to the scrapping of particular denominations of currency by a government. The governments make the decision of making specific denomination notes or coins dysfunctional in order to counter inflation and other illegal activities. It also acts as a measure to tackle various issues that pose a hurdle in the country’s overall development.

Effects of Demonetization on Indian Economy

Though demonetization shook the economy for a brief while, many positive short term effects of demonetization are visible while it will take another five to six years for the total effects of demonetization to surface.

Demonetization had many positive effects on the economy of India, by bringing black money back into the mainstream, curbing anti-national and illegal activities, etc. However, it also caused a high amount of chaos and confusion. Some infamous after-effects of demonetization included a shortage of cash, long queues in front of banks and ATMs, a drop in share market and a reduction in the industrial output.

Some analysts claim that demonetization has adversely affected the Indian economy by lowering down the GDP (Gross Domestic Product) because many small and medium enterprises shut down their businesses due to cash deficiency.

– Brought Black Money in the Mainstream

Despite all the mentioned adverse effects of demonetization, it resulted in the recovery of 99% of the money back into the notice of tax agencies.  During the demonetization, a total amount of 15.28 Lakh crore was deposited in the Bank Accounts including the Jan Dhan Accounts of the poor. The money in the Jan Dhan accounts was deposited by tax evaders, who did it to save themselves from losing their money.

This amount which was to date lying idle in lockers and safes became instantly taxable, boosting the economy. Demonetization also resulted in the successful curbing of the counterfeit currency notes. After demonetization, counterfeit currency notes came down to a minimal percentage of 0.0035%.

– An instrument to Fight Corruption and Anti-National Activities

Demonetization was a decision that had short term inconveniences but has long term advantages for the Indian economy. Short term inconveniences include cash deficit, long queues at banks and ATMs. Long term advantages of demonetization in the Indian economy will come through – reduced corruption and anti-national activities, digitalized economy, and greater savings, ultimately leading to a greater GDP.

– A Push to Cashless Economy

An income tax return filed after demonetization increased from 43.3 million to 52.9 million. One of the major effects of demonetization was that it gave a push to digital payments in India. With the scarcity of cash and long queues outside banks and ATMs, people turned to digital mode of payment.

It also served as a speed breaker for corruption. The illegal exchange of money between the conveners of corruption stopped both in government as well as in private sectors. A large amount of money, which was stashed as a bribe and for other similar activities, instantly became useless and either had to be deposited in banks or thrown away.


The decision of demonetization was taken keeping the national interests at the forefront. Though the decision might have caused inconvenience to the general population, it definitely had a national interest and economic growth at its core. For decades India has been reeling under Naxalism and terrorist activities. Demonetization, although for a brief while, actually stopped such anti-national activities, giving relevant agencies time to take countermeasures and identify their funding sources, while boosting India’s economy in the long run.


Essay on Merits and Demerits of Demonetization (600 words)


“Demonetization” refers to the currency of a particular denomination losing all its worth after a certain point of time as declared by the government. If a government declares demonetization of a legal tender, it means that the currency of that particular denomination seizes to be used in any business transactions, in other words, the money loses its worth in the market. The possessor of the currency has no option but to get it exchanged in a bank, thus, declaring it to the government and paying necessary taxes.

Merits of Demonetization

The government of India in a historic decision demonetized the currency notes of Rs. 500 and Rs. 1000 on 8th November 2016. Prior to demonetization, there was a high amount of black and counterfeit currency notes in the Indian market. Also, there was a high amount of untaxed currency available with individuals and agencies in the form of hard cash. Getting such counterfeit and untaxed money back into the mainstream was necessary to strengthen the nation’s economy and banking system.

> Bringing Untaxed Money in Mainstream

Prior to the demonetization, there were many fair players in the Indian economy who were out of the precincts of the banking system. These constituted of small farmers, businessmen and there was a need to bring them back into the mainstream.

> Curbing Corruption

Corruption deals with unaccounted and undeclared money. There was a huge amount of money circulated in India in the denominations of Rs. 500 and Rs. 1000 for corrupt deals in private as well as the government sectors.  The present of this unrecorded money in high amount, not only was fuelling corruption but also making Indian Rupee weaker. Demonetization was the need of the time, to curb corruption as well as to strengthen Indian Rupee in the international market.

> Boost to Cashless Economy

Demonetization was effective in many ways. Initially, it did lead to chaos and confusion due to the shortage of new currency and long queues in banks and ATMs; nevertheless, the decision had some positive effects too. Indian demonetization of 2016 was effective in making India a cashless economy. With the scarcity of cash and due to the long queues outside banks, people and businesses turned towards digital transactions. Any digital transaction comes under the radar of government, ultimately resulting in more tax payments and less circulation of unaccounted money in the market; subsequently, resulting in strengthened banks and improved economy.

> Gave Way to Digital Transaction

Digital transactions in many cities had doubled post demonetization. Digital payment gateways like Paytm and MobiKwik recorded an unprecedented increase in the number of users.  Apart from an increase in digital transactions throughout India, there was also a high amount of deposition of old currency, bringing it back into the mainstream. According to the records more than three Trillion Rupees were deposited in banks during the period of demonetization.

Demerits of Demonetization

Though the move of demonetization was supported by banks and some international commentators, it also faced a fair amount of criticism from various factions inside India. Many opposition parties deemed the move as useless and unnecessary. The critics were of the opinion that demonetization will hamper economic growth, rather than boosting it.

Long queues of people outside the banks were made an issue, by the political class and presented as an act inhuman and anti-poor. They claimed that the real possessors of black money had somehow already convened with the banks to exchange their illegal currency, thus resulting in the shortage of cash. The government was also accused of poor planning and management.

A Public Interest Litigation (PIL) was also filed by Indian National League, in Madras High court, requesting scraping of demonetization decision; however, the Court refused to intervene in the government’s monetary decision.


Whatever might have been the controversies surrounding the demonetization and whatever might be the claims made by critics, there is no denying the fact that the decision was taken in the national interest. Though it might have missed achieving some goals, it did hit some significant ones like – bringing black money into the banks, reducing inflation, curbing anti-national, illegal activities and making India a digital economy.

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Shefali Ahuja

Shefali is Essaybank’s editor-in-chief. She describes herself as a teacher and professional writer and she enjoys getting more people into writing and answering people’s questions. She closely follows the latest trends in the article industry in order to keep you all up-to-date with the latest news.